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UZ/Uei ab 1U: 11 Ili '041a 414 1140 aAL Aurr-AVV?1 0 .µJ vV Y/ V1Y .;02/86/% 17:0128 03-4888-> 415 274 1726 --dm's Inuestors Page 003 2 General Obl%KdkxVSpecial Tax February S. 19% Hawaii County, Hawaii Agriculture as % of Tax Base, 1996: 26.3% Moody's Ratings, % of Tax Burden: 30.1% General Obllgation Bonds, Government Employers as % of Series 89A dud. 12/1/89 (MBIA): Aaa Employed Labor Force. 10/95: 17.4% merles 89B did. 11 /1/89 (MBIA): Aao Unemployment Rate, 10/95, Series 93A did. S/1/93 (FGIC): Aaa County: 9.1% State: 5.7% analysis: Growing Fund Balances, Despite Slower Tax reversal in property tax base growth - a resource Collections providing two-thirds of operating revenues - has rep- The County ended the 1995 fiscal year with a $4.2 resented a significant budgetary challenge. million General Fund surplus, following two years of Property tax collections dropped during this period prior surpluses. These surpluses have helped the from 98% to 91% between fiscal 1991 and 1995. county build growing fund balances. The total fund While the recovery of total collections has been rela- balance is now 15.7% of General Fund Revenues and tively rapid, and while the levels of appeals have the undesignated balance totals 8.796, The corny declined since peaking in 1994, the county still has derives nearly 80% of its revenues from two key tax 1234 appeals on approximately 4.5% of the net taxa- sources: property taxes and the county's share of the ble value. Most importantly, while the declines have state-wide Transient Accommodations Tax (TAT). been small, they have not been matched by increases Economic conditions, including the slowdown in in the tax rates, thereby resulting in the declining tourism, have created stagnation in the TAT since property tax revenues. 1992 and property tax revenue growth slowed in Rapid Payout. Absence Of Borrowing Plans, 1995 and a decline is projected in 1996. Offset High Per Capita Debt While the county continues to face financial pres- Counties in Hawaii arc the only form of local govern- sures due to the slowing tax revenue collections and ment and them are no underlying cities, school dis- the growth in nondiscre i cawy expenditures, such as tricts or special districts. As a result, apart from retirement system contributions and debt service, some special assessment debt, all debt on the island's conservative budgeting techniques have created suffi- tax base is attributable to the county. Much borrow- cient reserves to provide adequate cushion. Specifn- ing for capital infrastructure generally financed cally, the county's practice of fully budgeting all locally elsewhere in the nation - such as for educa- positions, including vacant positions, has reportedly tion, health cam and judicial functions - is financed helped contribute to the reserves. by the state. In this context, the district's per capita Contraction Of Tax Base, Follows Rapid debt levels are well in excess of levels expected for a Growth Early In The Decade county of this Am Debt service represents nearly Hotel and resort development, including high-end 10% of operating expenditure& development such as new projects for the Ritz-Carl- Concerto about these debt levels are offset by the ton, Westin and Four Seasons hotels, helped spur a relatively rapid amortization of the debt service. The doubling of the tax base between 1990 and 1994. current issue is amortized over 20 years. As is However as the impact of the national recession hit common in Hawaii, however, initial principal amorti- the tourism market and as agriculture continued to zation has been deferred three years. The county show the effects of growing international competi- does not have any additional borrowing plans for the tion, tax base appeals doubled in 1994 with 7.8% of next three years. Debt burden is moderated by the the tax base under appeal. As it result, the overall tax high value of property with little associated popula- base declined by 1.8% in 1995 and 0.1% in 1996. tion - for example, large agricultural holdings and While these declines are very small compared to the resorts - which help to moderate the debt levels as a rapid growth of the prior half decade, this rapid percent of the tax base.